How to Use Data Analytics to Understand Customers, Business, & Make More Money

Even as a little kid, I loved to crunch numbers. I never wanted to be a firefighter or an airline pilot or a doctor -- I just wanted to do the math. To me, it was all about finding patterns and solving problems. As an adult, I figured out that I could apply this love of numbers to actual business outcomes. That's because finding patterns and solving for problems -- in other words, data analytics -- is what any business of any size has to do in order to survive and thrive.

Despite my math background, I've always considered myself first and foremost a consumer researcher who uses data to gain insights into human behavior, and that's what I focus on at Farmers Insurance. Today, if you're a small business owner, you need to get that data just as much as any large corporation. And even if you've always been math-averse, you can learn how to apply analytics to your own business.

Every business owner, no matter how math phobic they may be, should get comfortable with collecting and analyzing trends about their customers.

1. Know Your Customer

Begin by cataloging the customers who are either the most loyal, coming back over and over again, or the ones who purchase the most. In any industry, you're going to find that as a general rule, 80 percent of your volume is usually contributed by about 20 percent of your customers. So you want to understand that 20 percent thoroughly, intimately.

Obviously, you'll need to establish some core demographic profiles of your customers, but you also want attitudinal profiling. In order to make successful business decisions, you need to know what's intrinsically motivating to your best customers, as opposed to what's intrinsically motivating to you as the business owner. And without that insight, you can't understand how to be loyal to your customers.

Remember that what matters to customers is how loyal you are to them. That's what will keep them loyal to you.

2. Measure Performance

Now you need to start looking at Key Performance Indicators, or KPIs. Companies collect these measurements to understand their progress toward achieving their key business objectives. KPIs should be directly focused on your bottom-line results, including revenue or profitability. But it's equally important to focus on what customers are thinking and how employees are feeling. These are qualitative KPIs that yield learning, and they should be measured as carefully as the quantitative KPIs that yield data by tracking sales or revenue.

Again, the tools you need to collect qualitative data don't have to be complicated. These can be as simple as a suggestion box, an online forum or a one-question survey. Really, it just comes down to asking questions and listening to the answers. Open-ended questions work best: What is one thing we should consider to improve your experience here? What is the best part of shopping here?

3. Test A/B options

You need to compare various options, whether that's different promotional emails or different store displays, to uncover what works. However, using this tool requires you to get comfortable with failure -- the alternative you love may bomb with your customers. But you can't learn how to succeed if you're not looking at what fails.

And if you get a result that's completely unexpected or contradictory congratulations! You just got a new perspective to share throughout the organization. So, don't be afraid of results that go against your own conventional wisdom because those "failures" can help drive change in an organization. Failure isn't an option on the road to success. It's mandatory.

4. Talk face-to-face

There's one more research tool that's especially important for small business owners and that is the face-to-face focus group. You can, of course, spend huge amounts of money on fancy formal focus groups, but you can also simply sit down and have face-to-face conversations with small groups of customers. When you have those conversations, you'll have a better understanding of your customers' inner motivations.

And that's where the science of data analytics meets the greatest talent of any successful small business owner: seeking and serving the needs of their customers, one by one. Listen and respond to them, and your business will not just survive--it will thrive.